Legal & Regulatory
By Melissa Cyrill
India’s Ministry of Corporate Affairs (MCA) recently introduced the SPICe Form INC-32, which stands for Simplified Proforma for Incorporating Company Electronically. The new form follows from the 2015 merger of securing allotment of the Director Identification Number (DIN), name approval, and incorporation application within a single process through Form INC-29 (under the amended Companies Act, 2013). In October this year, the MCA took a step further and established the ‘Companies (Incorporation) Fourth Amendment Rules, 2016’ to facilitate this integration via the electronic format through the SPICe Form INC-32, the e-Memorandum of Association (eMOA) in Form INC-33, and the e-Articles of Association (eAOA) in Form INC-34, besides few other changes.
With the latest amendments, the government will be able to provide and regulate fast and efficient incorporation services within stipulated time frames, in line with international best practices.
Latest Government Updates on Implementation of High-Value Rupee Demonetization
Banks in India are reeling from the real-time spate of announcements made by the government to manage the incredible scale of logistics involved in the sudden demonetization of the 500 and 1000 Rupee notes. In the latest notifications announced, the government directed banks to use indelible ink to mark customers exchanging the defunct currency, introduced new caps on amounts that can be exchanged – first increasing it to US$ 65.99 (Rs 4500) from US$ 58.66 (Rs 4000), and subsequently, reducing it to US$ 29.33 (Rs 2000) before putting a temporary moratorium on the exchange, before reverting to the US$ 29.33 (Rs 2000) limit. However, in terms of expanding points-of-sale (PoS), petrol pumps will now offer cash withdrawal services (via card swipe machines) for maximum limit of Rs 2000 (US$ 29.33). Initially, this will be available at 2,500 petrol pumps (gas stations) across the country that have card swipe machines from State Bank of India, which will then be extended to 20,000 outlets that have card swipe machines from HDFC Bank, Citibank and ICICI Bank. Currently, about a third of India’s 202,000 ATMs have been upgraded to dispense the new Rs 2000 and Rs 500 notes.
By Pritesh Samuel
In a surprise move, the Narendra Modi government announced on the night of November 8 that the existing US$ 7.5 (Rs 500) and US$ 15 (Rs 1,000) currency notes will be withdrawn from public use from the following midnight. The move is the government’s boldest step yet to curb the circulation of black money and counterfeit currency as well as control inflation. Only twice before, first in 1946 (a year prior to independence) and then in 1978, has the government taken such a decision to demonetize high value currency.
As soon as the announcement was made on Tuesday night, long queues were seen at ATMs and banks to either withdraw US$ 1.5 (Rs 100) denominations or deposit the 500 and 1000 rupee denominations. All banks and ATMS will be closed on November 9 to replace the older denominations. Banks are expected to re-open on November 10 while ATMs are expected to commence limited operations from the same day itself.
To alleviate inconvenience in the near term, airline ticketing counters, government hospitals, pharmacies, and railway reservation counters will accept the old currency notes until November 11. The older currency denominations can be exchanged or deposited at banks until December 30.
Multi-Tier Goods and Services Tax (GST) Structure Finalised for Goods Categories
India is one step closer to implementing its most ambitious tax reform, the Goods and Services Tax (GST), which seeks to replace the existing multi-layered indirect tax structure, and in turn establish a single national market for goods and services in the country. On November 3, the GST Council reached a broad consensus over a four tier GST structure with the following slabs of 5 percent (mass consumption items like spices, tea, mustard oil), standard rates of 12 (processed foods) and 18 percent (soaps, oil, toothpaste, smartphones, refrigerators), and the higher slab of 28 percent (for white goods and cars). The segment of luxury cars and demerit goods such as tobacco and aerated drinks will be subject to the 28 percent tax slab in addition to a cess.
By Pritesh Samuel
In June, the Ministry of Corporate Affairs (MCA) amended the Companies Act of 2013, introducing the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT), and replacing the Company Law Board (CLB) after 14 years of deliberations.
The NCLT will be a single judicial forum to judge all disputes concerning the affairs of Indian companies. Both the NCLT and NCLAT were made effective from June 1; they should enable faster implementation of the bankruptcy code and also reduce the burden of hundreds of cases pending in the courts.
Central Bank Directive to Tighten Cyber Security after Debit Card Data Breach
India’s central bank, the Reserve Bank of India (RBI), has called on banks to ensure tightened cyber security norms after the country’s largest data breach involving debit cards went undetected for three months. All lenders (banks and payment network service providers) will now need to report on their cyber security issues to the RBI on a real-time basis. Another proposal in the offing is a suggestion that banks centralize their cyber security monitoring and have a dedicated operations team in place for the same instead of outsourcing such surveillance.
Government Eases Incorporation Services for Companies in India
The Ministry of Corporate Affairs (MCA) recently announced new rules that will simplify and speed up the process for incorporating companies in India. Currently, the incorporation process takes about four weeks.
By Pritesh Samuel
India’s central bank, the Reserve Bank of India (RBI) made a statement on October 3rd that will allow startups to accept foreign currency loans of up to US$ 3 million a year under the external commercial borrowing (ECB) route. Startups will now be able to raise the amount either in Indian rupees or any convertible foreign currency or a combination of both. Guidelines are expected to be issued at the end of the month.
Earlier in February, the RBI allowed startups to raise Indian rupee loans through the ECB route. Another advantage of allowing startups to borrow in foreign currency would be to cut down conversion costs. However, they will need to comply with guidelines like locking in foreign exchange rules. Prior to this easing of borrowing rules, in July, the Indian securities regulator – Securities and Exchange Board of India (SEBI) – introduced easier regulations for startups that wished to raise funds from the equity markets.